Industry Update April 2010
Sunday, April 25th, 2010
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With regard to equity market performance, I am torn. My head says, “Go with the momentum. Broad rally here.” My heart says, “Profit margins will be at records with the 2011 earnings estimates; aim for industries that are out of favor.”
If I try to unify the two, I remain convinced that high quality companies are the better place to be — better valuations and far less risk.
In any case, I am looking at modifying my portfolio, and the industries that interest me fall into energy, utilities, healthcare, and stable sectors.
Note for my first model, the green zone is the anti-momentum or value zone. The red zone is the momentum zone.
Use the model consistent with your personality. If you like buying mean-reversion buy in the green zone. Momentum, buy the red zone.
My selections in “Dig Through” reflect higher quality areas of the market that I think will be rewarded over time. Remember that I am for outperformance over a three-year period, though I have often done that over shorter periods.
The second industry table comes from the S&P 1500 supercomposite, while the first comes from Value Line. The results are broadly similar. Still, at this point in the markets, I am more inclined to caution than risk-taking. I feel that it is 10% upside and 30% downside here.
These are only educated guesses, but as I readjust my portfolio, I sense that I will toss out cyclicality, and buy utilities and other stable companies.
